Capital One Financial Corp., the top performer (BKX) this year in the KBW Bank Index, plans to sell or restructure hedge-fund and private-equity investments prohibited by new U.S. regulations.
Capital One holds about $150 million in stakes disallowed under the so-called Volcker rule, the McLean, Virginia-based lender said in a letter to the Securities and Exchange Commission dated July 29 and made public today. The rule would bar banks from owning more than 3 percent of hedge funds and private-equity funds and investing more than 3 percent of Tier 1 capital in such funds.
The bank, which doesn’t have units that sponsor or invest in hedge funds or private-equity funds, acquired the investments through the purchase of other lenders and doesn’t expect the rule to have a “material effect,” according to the letter.
“We expect to be required under the Volcker rule to dispose of certain investments in private equity or hedge funds acquired with our past bank acquisitions,” Capital One said in the letter. “We are considering options to exit or restructure these investments.”
Capital One climbed (COF) 4.6 percent to $41.86 in New York. The shares have dropped 1.6 percent this year, the best performance in the 24-company KBW index, which has declined 31 percent.
The SEC, as part of a review of the bank’s first-quarter filing, asked Capital One in a July 19 letter to discuss how the Volcker rule would affect business units that sponsor or invest in private-equity or hedge funds. The agency said in an Oct. 12 letter that it had completed its review. Such correspondence is typically released about 45 days after a review is completed.